Page 48 - Banking Finance December 2019

FEATURE

Agarwal invested Rs 16 lakh in the Adarsh Credit Cooperative the scanner in Rajasthan, is accused of siphoning off Rs
Society in 2015. Sitting in one corner of his room at his house 14,000 crore. While the Sanjivini Society has conned
in Jaipur's Tonk Phatak neighbourhood, he seems to be a investors of around Rs 1,100 crore, the Navjeevan Society
little troubled now. More than getting back his life's hard- has indulged in fund embezzlement to the tune of another
earned savings, he worries about the future of his three Rs 1,000 crore.
granddaughters because his saving was supposed to be the
"gift money" for their wedding. Of Adarsh's 806 branches, 309 are in Rajasthan. Although a
multi-state firm, 75% of its depositors are from the desert
"My life is almost over. So, the money is more important state. Adarsh started its operations in 1999 primarily
for my children and for their daughters," says Agarwal. "For catering to the rural agricultural masses. With most investors
a retired government servant like me, Rs 16 lakh is a huge in these schemes being agents themselves, people believed
amount. I am not sure whether I will get it back in my them easily. And with interest being paid on time and
lifetime. I should not have listened to my son and should reinvestment policies easy and fair, people never had an
have stuck to the good old post office." inkling of the big scam that was coming.
J.P. Yadav, professor in the economic administration and
His son,”Hanuman, also in government service and an
investor in Adarsh Society, says: "The company has been financial management department of Rajasthan University,
around for over 20 years. We know a number of family says: "This credit 'cooperative' term incorporated in the
names of these societies often mislead villagers to believe
members, friends and colleagues who invested in the
company. After we invested in 2015, we never felt anything that they have some backing from the government. Coupled
with higher interest rates offered on deposits, it is easy for
was wrong because we got all our returns on time through
cheques. Our 15% dividend was also regular." agents to convince the public, especially in rural areas."

But there is definitely at least some government culpability.
But something changed by mid-2017. Hanuman says the
demonetization of 2016 had a spiralling effect in the last The societies, after all, have to register with the cooperative
department before starting operations. A yearly audit is
three years. With the cash flow erratic, deposits fell. And
as these credit cooperative firms had invested in real estate, mandatory as well. Many defrauded investors are now
their money got stuck. With no money rolling, the company's pointing fingers at government apathy when it comes to
regulation of these societies.
usual strategy of asking investors to reinvest a major part
of their deposited money took a hit. But, ultimately, the genius of these scams, which have hit
many parts of the country, is that they play on the
Despite this obvious point of no return, many of those who fundamental element of trust, says C.B Yadav, president and
have been duped, like Hanuman, still expect to get their spokesperson of the All Investors Safety Organisation. "The
money back once the state of the economy improves. main problem we faced while trying to get the affected
investors together is that the investors themselves are
Dhabhai, the political science professor, reasons: "Owing to commissioned agents. So, getting them to realize the
the strong presence of a mercantile elite in the city, 'money' fraudulent ways of their company has been difficult. Working
has assumed a dimension that is more than simply material on a multi-level marketing system, agents earn big incentives
and need-fulfilling. Rather, it seems to be connected to a for luring in more people into the network. In western
popular understanding of finance and speculation. It seems Rajasthan, wherever these chit fund societies have thrived,
the financialization of the economy that many cities have there is less connectivity, the villages are scattered, and the
seen recently was part of Jaipur's popular culture even agents are known, trustworthy people in the villagers."
earlier. This historical and cultural embeddedness of money
as finance perhaps explains the overt absence of a public In the end, many of the traits that made Rajasthan
discourse about financial misdemeanours." successful-from a keen sense for business opportunities to a
deep reliance on kinship networks-came together to create
In conclusion a perfect storm and sent crime figures soaring. And within

But whether there is a public outcry or not, the estimated that cautionary tale perhaps lies lessons not just for Jaipur,
size of the unfolding fraud is staggering. Adarsh Society, but every emerging city looking for a quick economic boost.
which is one of the three big credit firms currently under (Source: Livemint)

48 | 2019 | DECEMBER | BANKING FINANCE